FIVE DAYS; Paying the Price When Companies Stumble

By Mark A. Stein

Published: September 16, 2006

MISDEEDS and errors in judgment came back to haunt several big companies, leading to the involuntary departures of several senior corporate officers. Voluntary departures, meanwhile, were solicited from the nation's unionized auto workers.

Not all news was bad, however. Energy prices tumbled, causing stocks to rise.

BOARD BATTLE -- Reeling from revelations that she had let the company spy on board members, Hewlett-Packard's chairwoman, Patricia C. Dunn, agreed to resign in January. George A. Keyworth II, a director she had accused of leaking information, resigned immediately, but denied he had violated any confidences.

Mark V. Hurd, the chief executive, will assume the title of chairman when Ms. Dunn steps down.

The artfully calibrated agreement came after Hewlett-Packard's board learned that private investigators not only misrepresented themselves to obtain phone records but had also secretly videotaped directors, according to people with knowledge of the company's examination of its private detectives' activities.

The California attorney general's office, which has been investigating whether the surveillance violated state laws, said criminal charges could be filed within a week.

A RIVAL STUMBLES -- Things were hardly much better at Hewlett-Packard's rival Dell. The Justice Department said it would join a Securities and Exchange Commission investigation of the company's accounting.

The widening federal inquiry comes after Dell's shares have lost about a third of their value in the last year, amid shrinking revenue, falling profit and quality-control problems that recently led to the recall of millions of laptop and notebook computers because their defective batteries could overheat and burst into flame.

The company's founder and chairman, Michael S. Dell, said the company would add senior managers to help his often-criticized chief executive, Kevin B. Rollins.

A C.E.O. FALLS -- Bristol-Myers Squibb fired its chief executive, Peter R. Dolan, amid a federal investigation of his efforts to suppress the generic version of one of the company's best-selling drugs.

Bristol-Myers's board acted on the recommendation of an independent monitor who had been overseeing the company as part of the settlement of an earlier scandal involving accounting matters.

While it mounts a search for a permanent successor to Mr. Dolan, the company said James M. Cornelius, a Bristol-Myers director, would serve as interim chief. Mr. Cornelius was recently interim chief executive of Guidant, the medical device maker, and was crucial to its acquisition by Boston Scientific.

The latest controversy involved the blood-thinning drug Plavix, Bristol-Myers's top-selling drug, with sales in the United States of $3.5 billion last year.

A challenge to the Plavix patent by Apotex, a Canadian maker of generic drugs, is scheduled to be heard in federal court in January.

DRUG TAX CASE -- Another pharmaceutical giant, GlaxoSmithKline, agreed to pay $3.4 billion to settle the largest tax dispute in the history of the Internal Revenue Service.

Under the settlement, which resolves a dispute over whether and how the federal government should tax transactions between Glaxo's holding company in the United States and its foreign divisions, Glaxo also agreed not to pursue a $1.8 billion income tax refund, the I.R.S. said.

Federal officials will next help to press a whistle-blower lawsuit that accuses Dey Inc., a California affiliate of the German drug maker Merck KGaA, of defrauding the Medicare program.

FORD BUYOUTS -- The Ford Motor Company accelerated and expanded its efforts to pare its costs and return to profitability. It agreed with the United Automobile Workers union to offer cash and other incentives to persuade 75,000 American workers to quit the company.

The company also announced further white-collar job cuts, as well as spending reductions and changes in its lineup of car and truck models and brands.

In January, Ford unveiled its Way Forward turnaround plan, which called for 30,000 job cuts and 14 plant closings by 2012. As the company's position deteriorated -- sales of its best-selling light trucks have been hurt by high gasoline prices, and Ford has lost $1.5 billion so far this year -- it decided to accelerate those cuts and closings.

Alan R. Mulally, a Boeing executive, will take over as Ford's new chief executive on Oct. 1, succeeding William Clay Ford Jr., great-grandson of the company's founder, Henry Ford.

SOME RELIEF -- Even though crude oil prices have fallen by more than $10 a barrel over the last month, OPEC ministers agreed not to reduce production, a move they might have taken to try to keep prices from falling further or faster.

While energy prices remain high, they have been falling from the summer peak because of a light hurricane season so far, the cease-fire between Israel and Hezbollah, and the United Nations' decision not to impose sanctions on Iran.

Even at the recent peak, crude did not rise to $100 a barrel, as some traders had predicted. Still, they said oil markets remained volatile and prices could soar again if hurricanes rake the Gulf Coast, the United Nations imposes sanctions on Iran, or political violence resumes in Nigeria, a major producer.

While the Organization of the Petroleum Exporting Countries kept production steady this week, analysts said the OPEC ministers are starting to think about whether to cut output next year.

TRADE RUMBLES -- In one of his first major policy speeches since becoming Treasury secretary this summer, Henry M. Paulson Jr. told Chinese leaders that their nation's future was imperiled by economic policies that Americans and others see as unfair.

In unusually forceful language, he said China had kept the value of its currency artificially low relative to the dollar, giving it an unfair advantage in global trade by making other nations' goods cost more than they should in China while giving its own exports a price advantage in foreign markets.

He also repeated demands that China loosen its controls on foreign investment and on the activities of its own banks.

The United States, the European Union and Canada may soon file a complaint with the World Trade Organization against China's tariffs on auto part imports, The Wall Street Journal reported.

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Photo: The Treasury secretary, Henry M. Paulson Jr., told Chinese leaders this week that their nation's future was endangered by economic policies that Americans see as unfair. (Photo by Kevin Lamarque/Reuters)